When MCAP announced its recent 2.39% 1-year special, it got a lot of brokers excited. It’s an ideal option for consumers needing a short-term mortgage and it’s an outstanding rate offering for brokers.
The bad news (for brokers) is that MCAP unexpectedly slashed its 1- and 2-year finder’s fees shortly after those specials were announced.
On the 1-year term, for example, it cut total broker compensation by 40-55%. MCAP’s compensation on 1- and 2-year terms is now virtually the lowest in the industry.
But this was a necessary tradeoff, says the company’s Vice President, Sales, Gino Tieri.
“We were asked by a number of large producers for a low-cost, short-term solution,” Tieri says. To do that, he says MCAP had little choice but to drop compensation to subsidize the rate.
It will now be interesting to see how many brokers push MCAP’s short-term products, given such a thin incentive.
Curiously, top-tier brokers at RMG Mortgages (another division within MCAP) have access to a slightly higher 2.49% 1-year rate, yet receive disproportionately better compensation.
National Bank is another lender that offers better comp on 1-year terms, assuming you’re a status broker who matches MCAP’s 2.39% rate.
One may think that making less for one year isn’t a big deal given the chance to renew the client again in 12 months. But the fact is, you have to win over the customer before the lender’s retention department does. And the odds are not on the side of most brokers, since 78% of renewers stay with their existing lender (Source: CAAMP).
That said, there’s one thing that’s great about MCAP from a mortgage broker’s standpoint. MCAP refers clients back to their originator if the customer calls in for a renewal quote and indicates they’re already working with that broker. Most lenders’ retention departments don’t extend brokers that courtesy.